Question

You manage inventory for a “Super Center” take-out deli department that is open 7 days a week. Your best seller is the fried chicken prepared in the store. You order every four days – and it takes the vendor three days to get your order to the store. Historically, you’ve never sold more than 3 cases of chicken parts per day. Applying the principles of continuous replenishment – and showing/explaining your reasoning:

Explain how (and calculate) the amount of time to be reliably replenished?

Explain how and actually calculate what the appropriate initial buffer size should be with the data that is given?

Answer 1

1. Weekly demand ( maximum) = 7x3 =21

Lead time = 3 days

Time between orders = 4 weeks

Assuming that demand can be saisfactorily fulfilled with 3 units per day order.

Reorder point = demand during lead time + safety stock

= 3x3 + Safety stock.

For ideal scenario ( deterministic condition) where there is not variation in demand and lead time, the safety stock can be kept as zero.

Hence reorder point is the one when the quantity reaches 9, which is three days demand equivalent.

(a) 3 days order cycle is sufficient in deterministic conditions.Hence the order should be placed after every 3 days.

(b) Initial buffer should be equal to lead time demand = 3x3 = 9